Morning Report: Decent jobs report 7/7/17

Vital Statistics:

Last Change
S&P Futures 2415.8 7.3
Eurostoxx Index 379.5 -0.9
Oil (WTI) 44.6 -0.9
US dollar index 88.3 0.1
10 Year Govt Bond Yield 2.38%
Current Coupon Fannie Mae TBA 102.88
Current Coupon Ginnie Mae TBA 103.75
30 Year Fixed Rate Mortgage 4.06

Stocks are higher this morning after a decent jobs report. Bonds and MBS are down.

Jobs report data dump:

  • Nonfarm payrolls up 222,000
  • Unemployment rate 4.4%
  • Labor Force Participation rate 62.8%
  • Avg weekly earnings up .2% MOM and 2.5% YOY

Overall, it is a decent report. The payroll number was a bit higher than expectations. The wage numbers are certainly nothing to get the Fed worried about inflation, although we still aren’t making much headway on bringing the long-term unemployed back into the labor force. Bringing those folks back into the workforce is the key (along with improving housing construction) to improving the economy from “meh” to “boom.”

The bifurcation in the employment market between those with jobs and those without is evident in what recruiters are saying: It is the hottest market in memory for some headhunters and things are definitely candidate-driven. Companies have been loath to give raises for over a decade, but they may be forced to in order to attract / retain talent.

Ray Dalio and Jeffrey Gundlach believe the top is in for the bond market (in other words, rates are going higher) and that stocks are vulnerable. Being short bonds is probably one of the biggest fast-money / wiseguy trade on the Street right now. Note however that notwithstanding the pop in yields over the past week or so, most of these guys are lugging a losing position.

Federal Reserve Governor Jerome Powell called the current US housing system unsustainable, and pointed directly at Fannie and Fred. Here is the problem: US mortgage rates are artificially low, and that is due to government subsidies. The 30 year fixed rate mortgage is a distinctly American phenomenon. In the US, the taxpayer bears the credit risk and the lender bears the interest rate risk. Loans are guaranteed by the government, which means the lender gets paid even if the borrower stops paying. The 30 year fixed rate means the borrower has no interest rate risk – it doesn’t matter where rates go, their rate stays the same. Everywhere else, the lender bears the credit risk and the borrower bears the interest rate risk (because everywhere else the rate floats with interest rates after a certain time period). Without the government backing, no lender would make loans at the rates Fannie and Fred can offer. His point is that real estate prices are based on subsidized borrowing rates and that makes the real estate market more susceptible to downdrafts. Nothing is going to change however – the US residential real estate finance market has been largely the same since the New Deal and there really is no replacement for it. Just remember this any time someone blames 2008 on the “free market.” There is nothing, absolutely nothing “free market” about the US residential real estate market. There hasn’t been since the Great Depression.

46 Responses

  1. Coulter writes a good piece here, regardless of your position on immigration. Not sure it’s moved me off my position (Open Borders and Instant Citizenship) but it does underscore the trade offs that exist within mass immigration as well as Melting Pot versus Cultural Diversity.

    “All this insanely inappropriate behavior would have continued ad infinitum, with American women being sacrificed on the altar of multiculturalism, but, finally, the Unstoppable Force of Diversity met the Feminist Immovable Object: He was fired from the hospital for sexual harassment.”


    Bello blamed his firing on “racism and discrimination,” so at least he was capable of assimilating to the American custom of immigrants being constantly aggrieved.


    • She opens strong: “The New York Times, still unaware there’s an internet, is trying to pass off the Nigerian as a Californian, the non-doctor as a doctor, and Mr. Obotetukudo as “Dr. Bello.””

      Man, ain’t that the truth?

      I would be all for open borders if we insisted on assimilation. Until then, they should be largely closed except to engineers and people with lots of cash.


  2. There is no “Deep State”.

    One out of every three Washingtonians has marched in protest against President Trump or his policies at least once since January, making the District the capital of national dissent, a new Washington Post poll finds.


  3. Good read:

    “What the stock market’s rise under Trump should teach Democrats
    Updated by Mike Konczal
    Jul 7, 2017, 9:20am EDT ”


    • Democrats need to reevaluate their idea of themselves as disinterested stewards of the economy

      I have a hard time believing that any Democratic politician views themselves as disinterested stewards of the economy. They may see themselves as entitled to the spoils of their political fiefdoms due to their moral superiority, and many no doubt think they have better ideas for the economy overall, but “disinterest stewards”? That’s stretching it.

      Of course, the Democrats could spend the political wilderness not changing anything.

      He wrote “could” when he should have written “obviously will”. Don’t they have editors? 🙂

      Republicans are trying to take health care from millions while cutting taxes for the rich, toxic positions within the electorate across parties.

      What evidence is there that cutting taxes for the rich is toxic across parties? I know the left doesn’t like it, and I’ve noted before I’m all for raising taxes (by adding more progressive steps) on the rich. But I don’t think there’s any evidence Republicans or moderates or the majority of voters react with visceral hate to the idea of cutting taxes on the rich the way the left and the Democrats think they do. If he wants to advise them to look elsewhere, that would be the first place to start looking elsewhere.

      A recent poll has a 40 percent favorable rating for Trump, but only 35 percent for the Democratic Party. An April 2017 poll surprisingly found that Trump would win in a rematch against Clinton.

      None of this surprises me, and certainly the idea that Trump would still win hasn’t gotten a lot of play in the mainstream. That being said, it makes me wonder why anybody thinks Trump would change or even think of changing anything based on his popularity? The Democrats are less popular, the press less popular still, and are they changing? The only thing that would make the Democrats change is the same thing that ultimately will make the press change (and only enough to change this one factor): money. If the Democrats get to the point where they don’t have enough money to function as a party, they will change something. Until then? Nah.

      The press will mostly go bankrupts and be replaced by bloggers. Or kept alive, like WaPo, via Jeff Bezos and turned into half-tabloid.

      he Republican Party as a whole hasn’t been this powerful since the 1920s

      Which means Trump is a modern day Hoover and some future Democrat is our next FDR! Happy days will be here again soon!

      That the Democrats are the best stewards of the economy is central to how the Democratic elite view themselves.

      I feel like they see themselves as the best social engineers for the culture. The whole “economy is better under Democrats” is just a meme. They see taxing and spending as tools to engineer a better society. I don’t think they view their role as disinterested stewardship of the economy at all.

      The Democratic Party used to give the answer, as Harry Truman did in 1948, that it “is pledged to work for labor.” In recent decades they’ve given an answer that was essentially “all sides, for the common good.” After 2016, Democrats should pick a side again.

      They didn’t just randomly stop doing actual stuff for labor because they took unions for granted (although, they did). The Democrats are steeped in corporate money. They are going to “pick a side” against their paymasters any more than the Republicans are. I guess the argument is that they need to pretend to side with the common man for votes.

      Can Democrats fix their woes by continuing to try to appeal to moderate voters?

      What are Democrats doing, and what did they do in 2016, that might actually appeal to moderate voters? I can’t think of much. And the alienation of millennials was a product of how the DNC treated Sanders, not because they courted moderate voters.

      A predominant Democratic view is that the economy is mostly fine; it’s just a matter of adjusting and correcting it to ensure everyone has access.

      That they think “ensuring everyone has access” (which I assume means relative equality of outcomes) is matter of just “adjusting and correcting” indicates a larger problem.

      On trade, for example, the consistent Democratic narrative in 2016 was that we need to “compensate the losers” of trade. The phrasing alone tells us everything we need to know. Which voters want to be identified as losers?

      He’s certainly right about that. The “Make America Sick Again” party is (“I’m With Her”) absolutely awful at branding.


      • ““disinterest stewards””

        I think the Obama and Bill Clinton types do. I also think that they actually believe this:

        “In recent decades they’ve given an answer that was essentially “all sides, for the common good.””


        • I think they believe it too. Obama was open-minded only in that he believed there could be different valid ways to reach the same progressive goals. It never entered his mind that people might not share the same goals.


    • Worse, small-scale redistribution creates inter-group competition that Trump has all-too-easily exploited. Whereas Democrats say that they’ll ensure that the worst off get taken care of, Trump turns this logic upside down: He says that he’ll take care of his white, middle-class voters (and not the “undeserving” poor, implicitly black and Latino). Universal programs are the way to defuse the zero-sum competition created by narrowly targeted programs.

      IMO, that is the unintended consequence of identity politics. Democrats steal from Republican voters to shower on their voters via raising taxes and increasing social spending, while Republicans do the opposite by cutting taxes and spending.

      I still think that is why socialism “works” in Scandinavia. Norway’s population is roughly the size of NYC and it is completely homogeneous. It is easier to have this “we’re all in this together” mentality. I wonder if the European welfare states will eventually fall by the wayside, as it Islamifies.

      Liked by 1 person

      • It’s also evident in how some countries in the EU don’t want to bail out the other ones.

        The other thing is Democrats believe that people’s primary identity should be their income bracket and get frustrated when they “vote against their economic interests”.

        Liked by 1 person

        • The EU is a symbiotic relationship. Germany benefits from the profligacy of its Southern neighbors in that it depresses the euro and makes their exports more competitive. Italy and Greece benefit because they can borrow at cheaper rates than they otherwise would be able to.

          Liked by 1 person

        • Sure. But it doesn’t mean that the Germans like bailing out the Greeks.


        • Sure. But it doesn’t mean that the Germans like bailing out the Greeks.

          No doubt. But it beats competing on the world markets with the Deutschemark..


      • Brent:

        I still think that is why socialism “works” in Scandinavia.

        This is the irony in the left’s “universal” approach. Leftist policies could conceivably be both more popular and workable in the US if they were implemented on a smaller, more local scale. But the left’s authoritarian impulses, along with its rapacious appetite for controlling other people’s money, cause it to push its policies at the highest, most all-encompassing level of government.

        Liked by 1 person

        • But the left’s authoritarian impulses, along with its rapacious appetite for controlling other people’s money,

          has always been the left’s Achilles heel….


        • If progressives were smart they’d treat every state like a potential socialist franchise, and start packaging up various turnkey socialist solutions and delivering them as deplorable packages at the state level. The ACA did some of that with the exchanges and Medicaid but it’s still mostly a federal thing. They should have sold it as a packages–do it at a state by state level. Mandate coverage and preexisting condition coverage an and then you get the Medicaid expansion!


  4. Similar to the above. It doesn’t even occur to the left that their “fact checkers” are partisan and have their own narrative to push. Then they lament that Trump voters don’t care when Snopes or Politifact calls something “mostly false.”

    Liked by 1 person

  5. Fuck!

    Well, there goes another narrative.

    But it sounds truthy!

    Liked by 1 person

    • How would the media react if the conservative Washington Times blamed Dylann Roof’s massacre of the black churchgoers in Charleston on Black Lives Matter?

      The Smartest People In The Room™ never seem to reverse the argument and consider what their reaction might be, or how their readership might view it if they did something like that. Yet it’s a great way to analyze your thinking when doing such speculative work.

      What I find interesting (personally) is that I was utterly unsurprised to find the media blaming right-wingers, the NRA, and Trump for the Scalise shooting. If the media was worth a nickel, that would have shocked me. Yet it does not.


  6. This cannot be possible. I’ve been told by Shrink, repeatedly, that Hitler was a Right-Winger.


    • Yeah. Megalomaniacs tend to exist beyond ideology. Or their ideology is something of their own assemblage, crafted to verify and support their narcissism. Trying to make Hitler into a left-winger or a right-winger seems to me to be a kind of a Rorschach test. You see what you want to see.

      True Believers will cheer anything. They’re on “the right side”, that’s all they need to know. Quote Hitler? Sure, it’s all good.


      • At the time, Russian Communism was generally defined as the autocracy of the left and Fascism as the autocracy of the right. Current definitions are just leftovers and as Kevin says ought not to be clung to, autocracies having more in common with each other than with with representative gummints.

        There were two bases for the original thought, and they were clung to by the Fascists and Commies as self defining in their hatred of each other.

        First, Fascism was the neo-form of feudalism – powerful groups; trusts and guilds, had a place at the economic table just as in pre-capitalist days, represented by their rich or powerful leaders, with the national leader – the monarch, or Hitler, or Mussolini, at the head of the table. Communism claimed to be post capitalism and kept all economic power in the state on the pretense that someday it would be granted directly to the workers’ “communes.” Which was bullshit.

        So Fascism and Communism were different, and they hated each other, and they called each other “leftists” and “rightists”, the right being considered reactionary by the communists as a throwback to the 17th Century and the left being considered by the fascists as variously revolutionary or utopian for its post capitalist frenzy to destroy the notion of private property which had theretofore survived throughout human history.

        I have no problem calling Fascism the autocracy of the far right and Communism the autocracy of the far left, but I think if we get stuck in these arbitrary handedness directions we lose sight of the fact that all autocracies suck, and get caught up in name calling.

        Liked by 1 person

  7. On Sunday morning, President Trump spoke of his new alliance with Russian President Vladimir Putin to erect an “impenetrable Cyber Security unit so that election hacking, & many other negative things, will be guarded.”

    Sen. Lindsey O. Graham (R-S.C.) quipped on NBC’s “Meet the Press” that Trump’s plan was “not the dumbest idea I’ve ever heard, but it’s pretty close.”

    Graham called Trump “literally the only person I know of who doesn’t believe Russia attacked our election in 2016″ and said he was “dumbfounded.” Graham said Trump is “hurting his presidency by not embracing the fact that Putin is the bad guy.”

    Y’all know I like LG.

    So it shouldn’t surprise anyone that I agree with him on this.

    I mean, WTF?


    • I simply cannot bring myself to care about Russia and 2016.

      Liked by 1 person

    • I care about Russia & 2016, but so far the only thing that’s actually been confirmed is that the DNC E-mails were hacked and then released to the press. That in itself doesn’t generate outrage in me.

      Now, if the Trump campaign either requested the hacking or coordinated with the hackers on the timing of the release of the hacked E-mail’s, then I’d say that’s impeachable and presumably indictable.

      However, getting “dirt” from people with connections to foreign governments is a bit more widespread than just the Trump campaign.

      The other thing is I find the argument that “Putin is the bad guy” to be oversimplified and falls back into the bad habit of dividing foreign actors into either “good guys” or “bad guys” which has caused so much bad decision making since World War II.

      Putin acts in his and presumably what he believes to be Russia’s best interests. Sometimes those interests align with the US and sometimes they don’t. It’s interesting to compare the reactions now to when George W. Bush pulled out of the ABM treaty.

      This is also worth keeping in mind about the dangers of letting US and Russian relations be this bad:


      • I care about Russia & 2016, but so far the only thing that’s actually been confirmed is that the DNC E-mails were hacked and then released to the press. That in itself doesn’t generate outrage in me.

        Not to be nit-picky, but the only “confirmation” that exists on this is a report by Crowdstrike and assumptions by some intelligence agencies (based on the Crowdstrike report). Nobody but Crowdstrike has seen the server.

        Podesta was phished, could be the Russians did it or bought the info.


        • The point of the so called cyber-security deal is interference with elections in 2018 and beyond.

          2016 already happened.

          Joint cyber-security with Russia is an oxymoron.


        • Partnering w/any nation over “cyber-security” seems stupid, to be honest.


        • I didn’t say it was confirmed that Russia was behind the hackers, only that E-mails were hacked and then released.


        • Sorry, I misread you.


        • “Joint cyber-security with Russia is an oxymoron.”

          Well, unless it’s against a common threat, like the Chinese.

          But in this case, it’s probably misplaced due to lack of good faith and lack of leverage.

          On the other hand, you could have probably made the same argument about joint efforts with Russia on nuclear arms control.

          Liked by 1 person

        • Like

    • Joint efforts with Russia in this realm would be a good idea, generally. I wouldn’t characterize it as an “impenetrable Cyber Security unit”, but cooperative efforts would be wise. A great deal of the hacking that comes out of Russia is rogue, organized crime, small groups and various individuals, and independent contractors or contract groups. What they do may generally be ignored in Russia, because they have no interest in challenging them.

      I’m not sure the Trump administration is the administration to really pull off a standardized cooperative effort between Russia and the US on hacking, but I wouldn’t dismiss it conceptually out of hand. Russia is not a country where everybody is on Putin’s payroll. And Russia is in a good position to shut certain things down.

      Nobody ever talks about port blocking. It wouldn’t do much for phishing, but if we’re getting hacked through any vulnerabilities outside of web, email, and ftp, we could just block all the ports from Russia. A non-trivial task, nationwide, but largely doable. You’d also have to refuse any anonymously routed or proxy traffic to those ports, which would force actors to set up their own proxies in non-blocked countries, making following the trail much easier.

      Not going to happen, because we’re not really that serious. But a joint initiative is at least conceptually a good idea, irrespective of what we believe or don’t believe the Russian government has done in some official capacity. In a realpolitik sense, we all do it.


        • A huge number of independent actors out there, in Russia and around the world. Which makes the whole “it’s definitely Russia, we caught them redhanded” thing BS. It could be varying degrees of credible but “caught redhanded” would be very difficult to prove without more evidence than they are likely to have.

          And it’s still kind of unclear by what they mean when they say “interfere” with the election. Steal emails and leak them? That’s one thing, but that’s not “hacking” the election. Attack voter rolls? That’s something more significant, but did they attack or attempt to get the data? Lots of data mining for identity theft coming out of Russia. Promoting fake news stories against Hillary Clinton? That’s was almost certainly not a Russian government initiative, but clickbait sites exploiting the highly partisan nature of our elections for filthy lucre. Some may be part of a Russian propaganda front, but in the present era I’m not sure what Russia hopes to gain by fabricating stories about FBI agents who were looking into the financing of the Clinton Foundation being found dead . . .

          In any case, there’s plenty of evidence they did nothing to tip the election, and plenty to indicate they never would. Primarily, they were engineered to appeal to (and consistently shared by) people who were never going to vote for Clinton in a million years. They were of Weekly World News quality, and probably got less exposure than an issue of Weekly World News back when, say, Bill Clinton was running in 1992.

          The New Republic’s actual journalistic take on how the Russian propaganda machine works in the Internet age:

          Which is not to say they are right, only that the article is researched and the authors don’t sound like idiots. Unlike, say, HuffPo:

          … which strikes me primarily as evidence-free fan-fiction.

          Stanford Study says, whatever, didn’t make a difference:

          Which I say is probably true, but not sure you can 100% prove it.


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